Piketty for Progressives 2

Thomas Riggins

“Introduction” to Capital in the Twenty-First Century— Part 2

2. Malthus, Young and the French Revolution

This section is not particularly enlightening as it is mostly just descriptive. We are informed that Thomas Malthus (1766-1834) wrote his 1798 work "Essay on the Principle of Population" based on few sources, one of the most important of which was a travel diary that the British agronomist Arthur Young (1741-1820)  published of his trip to France (1788-89) where the extent of poverty he saw led him to fear a revolution was in the offing. Malthus was led to believe the social troubles facing Europe as a result of the French Revolution and the changing economic conditions of the day were caused by overpopulation. Too many poor people were being born and not enough food could be produced to feed them. His solution was to advocate the end of any kind of welfare aid to the poor (let nature take its course) and to discourage their procreative activities. Piketty says we cannot understand the extreme views of Malthus without understanding the role that fear played in a Europe experiencing revolution, fast economic changes, and the rapid increase of population and poverty occasioned by the Industrial Revolution. He stress that the theoretical work of the time was based on limited sources due to scanty record keeping by modern standards.

3. Ricardo: The Principle of Scarcity

Piketty says in retrospect we might make fun of the dark prophecies the nineteenth century  thinkers made concerning the dire consequences that the development of the class nature of capitalism and the consequent unequal distribution of wealth seemed to indicate.  He seems to think “these prophecies of doom” did not happen  but were justified by the “traumatic” changes the development of capitalism and the Industrial Revolution engendered. David Ricardo (1772-1823) and Karl Marx (1818-1883) “the two most influential economists of the nineteenth century” both had apocalyptic views of the future. Ricardo thought the wealth of society would be monopolized by the owners of land, Marx by the industrial capitalists. In this section Piketty discusses Ricardo’s views.

Ricardo's interests were in the price and rent of land and were expressed in his 1817 book "Principles of Political Economy and Taxation." He had few statistics to work with, Piketty says, but he understood contemporary capitalism and further developed the theories of Malthus. As population grew the demand for land (for agriculture especially) would go up and so would its price and consequently the amount that could be charged as rent.
Eventually the landowners would be getting the lion's share of the wealth expressed as income and the rest of the people would be getting less and less. Unless taxes on land were radically increased to readdress this income imbalance social stability would collapse and the spectre of the French Revolution would arise to haunt Europe.

Piketty points out that Ricardo was wrong because of technological and industrial developments that took place after his time that diminished the role of agriculture in the economy. Nevertheless, Ricardo's views on the role of "scarcity" were insightful as they indicated that the prices of certain commodities (goods and services) could get out of hand and disrupt society, especially in the present age when the global economy is coordinated and kept in balance by an international pricing system.  "The problem is," Piketty says, "the price system knows neither limits nor morality."

Here is a classic example of the problem of reification discussed by Marx in the first volume of Capital in the chapter on the fetishism of commodities. Something created  by human beings takes on an "independent" existence and enthralls its creators who treat it as as some kind of  self-subsistent entity whose laws we are subject to and incapable of changing or abolishing.

Scarcity could still be a problem in our century. But there is a way to contain problems of scarcity-- namely supply and demand. Piketty says if prices get too high because of lack of supply, then people will not buy  and the demand will lessen causing the prices to fall. But what about a problem with the food supply? Not enough food, sky high prices, people can't buy-- but will the demand for food lessen? It would not. It's possible that food purveyors would end with a wholly disproportionate and unequal share of social wealth in their control.  Piketty thinks in this sort of situation a Ricardian Apocalypse is theoretically possible. However, he doesn't think it will ever come to this but will put off further consideration of this problem until later in his book where his treatment "will be more nuanced.”

4. Marx: The Principle of Infinite Accumulation

By the time we get to Marx in the second half of the nineteenth century (Capital Vol. I came out in 1867) the main problem was understanding how industrial capitalism actually worked and what was responsible for the immiseration of the  industrial working class [and not just it alone]—“the most striking fact of the day.”

 During this period, right up to World War I, Piketty says, the evidence indicates that there was growing income inequality with the ruling class expropriating more and more of the social wealth created and leaving less and less for the working people and others in society to share. He says this “endless inegalitarian spiral” only came to  an end due to the shocks of the World War and only these shocks could have halted the growing inequality let loose by the Industrial Revolution. [One of the biggest shocks was, incidentally, the Russian Revolution and the forces of social consciousness it unleashed on the planet— still somewhat reverberating throughout the world.]

Piketty dates the birth of  the “first” movements of socialism and communism to the 1840s (actually there were even earlier movements dating back to at least the seventeenth century) when people began noticing that while capitalism was working for the capitalists, enriching them, the working people were not benefiting from the system and were subjected to the same kind of miserable living conditions as they had in the pre-capitalist past.

Enter Karl Marx who sets himself the task of explaining how capitalism works and why it keeps the working people is such miserable conditions (relatively speaking). Piketty says Marx built his system (expressed in Capital ) on two principles he took from Ricardo— the principles of the price of capital and of scarcity. It is true that Marx had great respect for Ricardo but he actually rejected Ricardo’s price theory, and replaced it by his own original theory developed out of his concept of labor power and surplus value based on socially necessary labor time. I don’t see how Ricardo’s views on “scarcity” played any positive role in Marx’s system as Ricardo’s theory was developed in the context of his misconceived theories of agricultural rent.

Pekitty also says that Marx developed a “principle of infinite accumulation” in which he showed “the inexorable tendency for capital to accumulate and become concentrated in ever fewer hands, with no natural limit to the process.” Piketty then says this is the foundation of his “prediction of an apocalyptic end to capitalism.”  Either the capitalists will fall into violent conflicts over their inability to keep accumulating (it isn’t infinite after all) OR the workers will revolt because “capital’s share of national income would increase indefinitely.”

Yes capital must continue to accumulate to survive in Marx’s system, but there are natural limits— namely saturating the market both domestically and eventually world wide. It was these conditions that led to monopolization, colonialism, and imperialism and brought about the apocalyptic twentieth century in which the capitalists managed to set off, two world wars, ignite both the Russian and Chinese revolutions, destroy the lives of hundreds of millions of people and usher us into the present century in which they have instigated violent conflicts in Europe, Africa and Asia anyone of which could set off a more general war. The instability of capitalism is as great as it ever was and poverty is spreading everywhere (except mostly in those countries still maintaining communist governments). Therefore, Piketty’s conclusion that  “Marx’s dark prophecy came no closer to being realized than Ricardo’s” is considerably premature— the game is still afoot.

This introduction has a strange reading, I think, of twentieth century history— it improves later in the book. He doesn’t see World One I as part of Marx’s Apocalypse but admits a communist revolution did break out in Russia “the most backward country in Europe.” However, “fortunately for their citizens” the advanced European countries “explored  other, social democratic, avenues.” I don’t know how advanced Spain and Portugal were after the war (WWI) but I don’t think Franco or Salazar qualify as social democrats, nor do Hitler, Mussolini, or Pétain. By and large I don’t think the citizens of the “advanced” countries had a very fortunate century.

There are two other comments on Marx in this section which are unjustified. The first is that he “neglected the possibility of durable technological progress and steadily increasing productivity” as “counterweights to accumulation and concentration of private capital.” Marx did not “neglect” either technological progress or increased productivity but he saw them not as counterweights but as the results of the accumulation and concentration of capital.

The second unjustified comment is that Marx did not devote much time to speculating about how a post capitalist society would be structured. This is meant to be seen as a failing on Marx’s part but that would be an error. Marx did not think it a good use of his time to engage in utopian speculations on the future but he did study the example of the Paris Commune of 1871 and discussed the economic and political actions that would have to be undertaken in a post capitalist society (“The Civil War in France”) and his ideas were elaborated on later by both Engels and Lenin. There is a Marxist literature on this subject to which Piketty could have referred.

Piketty ends this section by saying Marx is still important to study and that his principle of “infinite accumulation” is still at work in the twenty-first century but not as “apocalyptic” as he thought. But this is faint praise and seems to miss the point of what accumulation is for Marx and why Marx is still important.

Piketty says too much accumulation of wealth when population and productivity growth rates are low can lead to social disequilibrium. But Marx isn’t talking about accumulation as too much private wealth. When Marx says “Accumulate, Accumulate! That is Moses and the prophets” [Capital I c. 24, section 3] He means that the wealth accumulated is to be reinvested in production because capital must expand itself continuously or perish. By reinvesting the capital people are put to work the economy expands and more accumulation is generated to do it all over again (until a crisis due to capitalism’s contradictions.) Marx is still important because this movement of capital is still going on and still creating crises (we are in one now) and the spectre haunting Europe has not been exorcized.


Part III of the this introduction will continue with Piketty’s section “From Marx to Kuznets, or Apocalypse to Fairy Tale.”